The Danish pharmaceutical company Novo Nordisk has manufactured insulin and diabetes drugs for over a century. But two new blockbuster drugs– Ozempic and Wegovy – have completely transformed the company’s fortunes. Novo Nordisk is now Europe’s most valuable company by market capitalization. Valued at over $570 billion dollars, the company’s market cap exceeds the size of the entire Danish economy.
Ozempic was developed as a treatment for type 2 diabetes, and contains the active ingredient semaglutide, a GLP-1 receptor agonist. The drug was intended to help patients manage their blood sugar, but one of semaglutide’s unintended side effects is a reduction in dietary cravings and a 15% reduction in body weight. Semaglutide contains synthetic versions of the human hormone glucagon-like peptide-1, which increases the production of insulin and helps to lower blood sugar levels and decrease appetite. Ozempic was approved by the US Food and Drug Administration in 2017 for patients with type 2 diabetes.
Wegovy, which contains the same active ingredient – semaglutide – was approved by the FDA in 2021 as a treatment for obesity. It has since been hailed as a miracle weight loss drug, with sales increasing by as much as 150% in the US alone. Celebrities like Kim Kardashian, Oprah Winfrey and Elon Musk have all admitted to taking the drug, which has contributed to an explosion in demand.
Novo Nordisk made over $18 billion in revenue from Wegovy and Ozempic in 2023, and expects to continue to post double digit sales growth numbers.
The company’s overwhelming success has contributed significantly to Denmark’s GDP growth numbers for 2023. While the Danish economy was expected to remain largely stagnant, steep global demand for Novo Nordisk’s Ozempic and Wegovy has driven the Scandinavian country to clock a 1.7% GDP growth rate, with economists claiming that nearly two-thirds of Denmark’s economic growth could be attributed to the pharmaceutical firm. Economists also suggest that the surge in Ozempic and Wegovy sales might be a principal cause behind the Danish central bank’s decisions to keep interest rates lower.
Novo Nordisk is also Denmark’s largest corporate taxpayer, contributing over $2 billion to the country’s public finances. Since a medical trial in 2023 suggested that Wegovy reduced the risk of cardiovascular diseases in obese patients, demand has soared even higher, much of it coming from the United States, where nearly a 100 million people are obese. With the American Medical Association recognizing obesity as a disease, analysts predict that insurers will soon come under pressure to cover Ozempic and Wegovy, which would prove to be a boon for Novo Nordisk’s revenues.
Economists worry however, that Denmark’s economy could become too dependent on Novo Nordisk’s success, and could fall victim to the Dutch disease, an economic phenomenon where a sudden increase in income from a single product or commodity tends to cause a country’s currency exchange rate to rise sharply, making other exports expensive and uncompetitive, which causes the rest of the economy to slump. The Dutch disease is named after the Dutch economy’s troubles in the 1960s, when the discovery of a large gas field in 1959 caused a calamitous decline in the country’s manufacturing sector.
Economists are also quick to highlight what they call the “Nokia risk,” referring to the Finnish telecommunications giant whose collapse in the mid-2000s spelled doom for Finland’s economy. While Nokia was outcompeted by its rivals in the mobile phone manufacturing business, many worry that Novo Nordisk’s unprecedented success carries far more risks. Publicized evidence of longer-term side effects arising from the use of Ozempic and Wegovy for example, could pose a huge risk to the company’s topline. Healthcare providers have already reported cases of patients prescribed Ozempic and Wegovy presenting with adverse side effects like stomach paralysis and pancreatitis.
But for now, the Danish economy is basking in the glow of the “Novo effect.” In the town of Kalundborg, where Novo Nordisk manufactures the two drugs, local businesses have seen their sales rise exponentially, and public officials have cut taxes six times over the last decade.
While Novo Nordisk’s GLP-1 treatments are not the only ones on the market, they are the only ones with semaglutide. Eli Lilly offers GLP-1 treatments marketed under the names Mounjaro and Zepbound, which contain the active ingredient tirzepatide. Until 2032, when Novo Nordisk’s patent on semaglutide expires in the US market, the risks of over relying on a single firm seem distant for Denmark’s economy.